The currency of a nation is a vanguard bulwark and safeguard to the wealth of a nation. Nigeria’s naira holds the intrinsic and inclusive value to country’s GDP and wellbeing. A deteriorated and weaken naira invites aggressive currency speculators to devour the wealth of a nation. Naira value must be aggressively protected because a given currency can be use to monetize debt and for settlement of debts but not necessarily for credit liquidity. This is why currency can be subjected to herculean inflationary trend when its elasticity approaches a deformed point.
From the BEGINNING, President Buhari has never been comfortable with outright devaluation of the naira. But as time goes and changes comes, it becomes imperative that naira devaluation maybe inevitable as pressure mounts from inside and outside the country.
Economic and monetary policy impulses notwithstanding, the real clamoring for devaluation was coming from international bodies especially IMF and top global financial media together with Nigerian experts that imbibe any economic theories coming from London, Paris or New York. For some of our local financial experts, to belong means to be carrying “banner of no pale pastels, but bold colors” membership card of the neoliberal globalization gang.
Nevertheless, I am not implying that the apparent Nigeria’s economic reality must not be acknowledged. The erstwhile propping up of the fixed naira rate with dwindling foreign reserve cannot be sustained. The nosedived of oil price and Nigeria’s incoherent economic policy are effecting the value of naira. Simultaneously, the uncontrollable free flow of naira has its downside too. As Nigeria proceeds with new policy on naira devaluation, interval evaluation and introspection cannot be neglected.
President Buhari questioned the benefit of the currency flexibility policy that has brought about 40 percent of naira devaluation as he spoke to the country’s business cream of crop at Aso Rock:
“I don’t like the returns I get from the CBN concerning the devaluation of the Naira. In August 1985, the Naria was N1.3 to a dollar but now you need N300 or N350 to a dollar. What do we derive from that? How much benefit can we derive from this ruthless devaluation of the Naira? “I’m not an economist neither a businessman, I fail to appreciate what the economic explanation is. What has happened to us now is that we have maneuvered ourselves into mono-economy which led to the collapse we are seeing now”.
The point Mr. President has succinctly made with above mentioned commentary was that the peril of naira devaluation has detrimental effect on the macroeconomic stability of Nigeria. The rising unemployment, hunger and economic dislocations can be attributed to the steep-curve rising inflation that has its root on the currency flexibility policy and the subsequent massive naira devaluation.
I will recommend to the presidency and top monetary policy makers to organize an international seminar in Abuja where the pro and cons of naira devaluation can be debated for its worth. The outcome of the seminar and debate will give Nigeria the upper hand to make a decision based on detailed and coherent economic policy rationzation.
A review and evaluation of the state of naira will not imply that flexibility policy will be abandon. But a measured, prudent and calculated devaluation will be incorporated to avoid total destruction of the worth of the country’s medium of exchange. If things are left the way they are with regards to the unchecked currency floating, Nigeria’s lopsided economy cannot be sustainable with limited supply of dollar.
Written by Emeka Chiakwelu, Principal Policy Strategist at AFRIPOL. His works have appeared in Wall Street Journal, Huffington Post, Forbes and many other important journals around the world.